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Employing in Spain

At a glance

Employment in Spain

As with other European countries, the Spanish labour market is highly regulated and heavily favours employees, making it notoriously tricky to navigate. There are numerous legislative requirements for employers to comply with, making compliance often costly and time-consuming. However, the global economic downturn has forced Spanish lawmakers to embrace political, social and legal reform in order to enhance flexibility within the Spanish job market.

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Payroll & Tax in Spain

Foreign companies operating in Spain may find it challenging to deal with the complexities of the country’s tax system. The primary concerns for a foreign company that needs to comply with tax laws in Spain are: Individual income tax (IIT) for employees in Spain, social security costs, VAT, withholding tax, business tax and permanent establishment concerns.

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Immigration / Work Permits in Spain

Generally, obtaining a Spanish work and residence permit is a lengthy and difficult process due to the restrictive policy adopted by the Spanish authorities. This is due in part to the current high unemployment in the Spanish labour markets and the recent spike in legal as well as illegal immigration in Spain. As such, the Spanish immigration system largely favours the hiring of Spaniards over foreign nationals. However, the Spanish authorities encourage the issue work permits to foreign applicants falling under one of the preference categories, namely investors, entrepreneurs, highly qualified professionals, researchers and employees under inter-company transfers.

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Incorporation

There are four types of business forms available to foreign companies in Spain. Each of these business forms has distinct advantages and disadvantages, as well as differing scope of business activities, registration requirements and minimum capital requirements. In most cases it will depend on the degree of commitment a company has to Spain and the planned business activity.

When setting up a company in Spain, you have the following options:-

  • Corporation
  • Branch Office
  • Representative Office
  • Joint venture

This article provides a general guideline for foreign businesses on entering Spain for business purposes. In particular, it looks at common pathways to establishing a business presence in Spain, generally through a corporation, branch office, representative office or joint venture. In addition, various economic, tax and regulatory factors are provided throughout as a source of useful information to assist those who will enter the Spanish economy. The guide also looks at some immigration requirements such as obtaining appropriate visa status.

Data is based on the time of writing, August 2015 or closest available dates.

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GEO Solutions or DIY Employment in Spain?

GEO Solutions or DIY Employment

Companies entering Spain must make a decision whether to use their own resources for a Do-It-Yourself (DIY) approach, or to use a Global Employment Organization to handle payroll and employment responsibilities. A GEO or Spain Employer of Record solution makes it faster, easier and cheaper to deploy staff if they don’t have a Spanish entity established that can run payroll.

A DIY approach will typically take 6-9 months until there is a properly incorporated WFOE ready to run payroll and cost up to 6 figures if registered capital is required. Shield GEO can deploy foreign staff in 4-6 weeks and local staff in 48 hours. Additionally Shield GEO is responsible for all compliance issues related to the employment.

Using Shield GEO Employer of Record Services in Spain

Payroll Spain
Management Fee for Employer of Record Services / Monthly Payroll Costs

Please contact us for a quote.

 

 
Grossed income Tax Rate (%)
0-€12450 20
€12451-20200 25
€202001-35200 31
€35201-60000 39
In excess of €60000 47

 

Tax Returns Supplied

N/A

Corporate Tax Requirements

A company’s tax period is the same as its fiscal accounting year. The tax period may not exceed 12 months.

Generally, corporations are required to make three advance payments of income tax during the year: in April, October and December at specified rates.

 

Companies must file a tax return and pay any tax due within the first 25 calendar days after a period of six months following the close of the fiscal year.

Employers Social Security and statutory contributions

The rate of social insurance contributions is generally 30.15% for employers. Please refer to the section on Employment ‘Pensions and Benefits’ for a detailed explanation.

Employees Social Security and statutory contributions

The rate of social insurance contributions is generally 6.35% for employees. Please refer to the section on Employment ‘Pensions and Benefits’ for a detailed explanation.

Corporate Income Tax Rate

Taxes are levied in Spain both at the national level (either by the central government or the regions) and at the municipal level (by the municipal authorities). Spanish entities are mainly subject to corporate income tax, branch profits tax and Value added tax (VAT). Other taxes include capital tax, transfer tax, real property tax and miscellaneous levies by the local governments. There are no excess profits or alternative minimum tax. Spain offers a special tax regime for Spanish holding companies (ETVEs).

The current corporate income tax rate is 28%.

Payroll Tax

None

Sales Tax

Persons (individual person, partnership, company with share capital or institution, permanent establishments) making taxable supplies of goods and services in Spain (excluding the Canary Islands, Ceuta and Melilla) subject to Spanish Value Added Tax (VAT) regime are required to apply for an Spanish VAT number before commencing business.

The current VAT rate is 21%. .

Withholding Tax

Spain imposes withholding tax (WHT) on certain classes of income earned by non-residents:-

  • Dividends: 20% (to be reduced to 19% in 2016)
  • Royalties: 24%
  • Interest: 20% (to be 19% in 2016)
 A reduced rate may be available under an applicable Double Tax Treaty.
Other Tax

Real estate taxes, transfer taxes, tax on the erection and installation projects and construction work, tax on increase in urban land value whenever land is transferred. For more information on the Spanish tax regime, refer here.

Work Permits
Can Sponsor Work

Shield GEO does not provide sponsored work permits in Spain at this moment.

Work Permit cost

Shield GEO does not provide sponsored work permits in Spain at this moment.

Work Permit processing time

Shield GEO does not provide sponsored work permits in Spain at this moment.

Work Permit process

Shield GEO does not provide sponsored work permits in Spain at this moment.

Can Work Permit be processed in country

Shield GEO does not provide sponsored work permits in Spain at this moment.

Business Visas
Can do Business Visa

N/A

Business Visa Cost

Shield GEO does not provide business visas in Spain at this moment.

Business Visa processing time

Shield GEO does not provide business visas in Spain at this moment.

Others
Can supply private health care

N/A

Can assist opening bank accounts

N/A

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